Goldman says Metals to Gas to be Boosted by Trump’s Revamp of America

According to Goldman Sachs Group Inc., commodities used to build everything from airports to bridges will benefit under Trump’s presidency as he has promised to revive American infrastructure.

Construction activity would be supported and boost steel, iron ore, nickel, zinc and diesel by spending by the Republican, who is set to enter the White House after defeating Hillary Clinton, analysts including Damien Courvalin and Jeffrey Currie said in a Nov. 9 report. According to the bank, demand for natural gas would grow as less uncertainty over policy boosts investment in an already competitive source for power and petrochemical production by Trump’s proposal to roll back emissions-reduction targets.

With a pledge to at least double Clinton’s estimated $275 billion, five-year plan for roads, airports and bridges, Trump has signaled spending of more than $500 billion to rebuild U.S. infrastructure.

After the Republican party shocked Democrats by keeping control of the Senate, Trump, the billionaire businessman who has never held public office, will have a Republican-controlled Congress behind him.

“The clearest message delivered by Donald Trump in his election victory speech was a focus on greater infrastructure spending in the U.S. Without specific details it is hard to quantify the impact on commodity demand, however such policies would support steel, iron ore, zinc, nickel, diesel and cement,” the analysts wrote in the report.

An increase in perceived geopolitical risks and possible restrictions on international trade have rattled global markets even while the president-elect is seen removing policy uncertainty and triggering greater investment in the U.S. After being whipsawed as investors wrestled with the implications of Trump’s win on Wednesday, prices of raw materials and shares of the companies producing them, recovered.

According to Goldman as the U.S. only represents 7 percent of worldwide demand and the nation’s steel per capita consumption is only half of China’s, under current consumption patterns, Trump’s infrastructure plan may have only have a “modest impact” on the global steel market. its analysts said: suggesting that a catch-up in investment could still lead to a significant recovery in steel demand, U.S. and developed-market infrastructure spending has been stagnant since the 1970s.

According to the bank, “rather than be outright bullish it may simply smooth the path of slowing Chinese demand growth for base metals in the second half of 2017 and 2018,” as the impact of Chinese stimulus is likely to fade and U.S. infrastructure spending is unlikely to kick in until the third quarter of 2017.

Goldman said that since is more closely tied to housing activity involving wires and appliances, the impact on copper demand would be limited. According to the bank, pointing to sequentially weaker demand growth, as the supply growth is accelerating into the year-end with weak housing starts, lower mortgage issuance and property sales in China.

With zinc jumping 3.2 percent, nickel up 2.2 percent and copper advancing 3.3 percent by 2:02 p.m. Singapore time, all industrial metals advanced on the London Metal Exchange.

Goldman maintained a mixed outlook for gold. The bank said that potential inflationary fiscal spending and import tariffs, may be positive for bullion, stronger growth could be bearish while fiscal and geopolitical uncertainty. The lack of policy details until the first half of next year keeps the outlook mixed for the commodity considered an investor safe haven with an interest-rate hike by the Federal Reserve still expected to come in December.

(Adapted from Bloomberg)

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